RBI comes out with draft to simplify licensing norms for money changers

MUMBAI — The Reserve Bank of India (RBI) has come out with a set of new draft norms aimed to simplify and rationalise the authorisation of money changers for facilitating foreign exchange-related services.

The review of the extant licensing framework aims to meet the emerging requirements of the rapidly growing Indian economy, achieve operational efficiency in the delivery of foreign exchange facilities to common persons, tourists, and businesses, while maintaining appropriate checks and balances, RBI said.

The framework for licensing of authorised persons (APs) under FEMA, 1999 was last reviewed in March 2006.

“Keeping in view the progressive liberalisation under FEMA, increasing integration of the Indian economy with the global economy, digitisation of payment systems and evolving institutional structure over the last two decades, it has been decided to rationalise and simplify the licensing framework for APs (authorised persons),” the RBI said.

The RBI has invited feedback on the draft framework from all stakeholders by January 31, 2024.

Reserve Bank has reviewed the extant authorisation framework under FEMA with an objective to further improve the ease with which foreign exchange transactions can be undertaken by users, and at the same time strengthen the regulatory oversight framework governing APs, according to the official statement released late on Tuesday.

The norms have proposed a new category of money changers who may conduct money changing business through an agency model by becoming forex correspondents of category-I and category-II authorised dealers. Such entities will not be required to seek authorisation from the RBI.

To reduce the regulatory burden and enhance the ease of doing business, the RBI has proposed to renew an existing authorisation as an AD category-II on a perpetual basis.

Authorised dealers category-II are those who can issue forex pre-paid cards to residents travelling on private/business visits abroad, subject to adherence to KYC/AML/CFT requirements. However, settlement in respect of forex pre-paid cards has to be effected through AD Category-I banks.